Supply Chain Impact from Production Capacity Constraints: A Computer-based Simulation Approach

Abstract

Abstract The bullwhip is a well-known phenomenon in supply chain management. Whereas past research has focused on factors like supply rationing, batch-size, lead-time etc., mainly from an analytical perspective. This paper broadens the research by specifically examining the impact from production capacity constraints not only on demand (order size) but also on inventory levels and supply chain cost. The results confirm past research and brings new insights in the impact on component and compound bullwhip effect behavior across supply chain echelons by showing that production capacity acts as a damper on the bullwhip effect.